The economic downturn caused Walmart’s private label sales to increase. Many consumers who had never tried private label products were forced to do so because of financial strains. What was surprising to them was that private labels were just as good as branded products, if not better. Walmart, therefore, generated a new customer base for these kinds of products and therefore maximized profit margins by selling their own brands. Now that the economy is recovering, many national brands cannot wait to resume production because they think that consumers no longer need private labels. Research indicates that consumers’ minds are now open and some of them will continue to buy in-store brands. Walmart considers the reduction of operating costs as one of its strategic goals and private labels do provide the organization with this much-needed cost cutting edge.
The company can expand its private labels by acquiring different categories of products. It needs to grow those brands by marketing them. If done well, the company stands to minimize costs associated with sourcing their products from national brands and may even replicate the same success that certain private label products have had such as Sam’s Choice – the third most popular drink in the 1990s (Sonia, 2006). Growth of the private label section is definitely a plausible way for the firm to market its goods, reduce costs and hence increase profitability.
An initiative discussed in the report-international expansion
The company considers organic growth and acquisitions as one of its core strategies. It worked towards this ththe rough addition of five hundred units in that fiscal year. The largest numbers originated from Canada, Brazil, China, and Mexico. As the company establishes its footprint in these countries, it also strives to provide them with quality services and merchandise. It does this by leveraging on its previously acquired knowledge from other markets around the world. However, the company realizes that some things cannot be transplanted to foreign markets; local stores need to respond to local needs. Major principles can be carried forward such as low purchasing prices, low operating expenses, and hence low retail prices but other small details are worked out by representatives in those countries. Usually, these managers will alter store formats or products stocked in order to cater to local markets. Customers in China may prefer more seafood than their counterparts in Canada so the local managers will have to assess that and respond accordingly. The company also streamlines its processes so as to minimize inventory and maximize output (Walmart, 2011).
In 2010, the company has worked on boosting sales by working on its international stores. Market share in these countries has tremendously increased. In fact, international sales grew by 11.2% for that fiscal year thus indicating that the firm is heading in the right direction. In fact, the international market has a higher number of retail units i.e. 4,112 compared to the US retail units which are about 3,708 units. Nonetheless, the US market is still responsible for the highest level of returns. In 2010, sales from the US market amount to $258,229,000,000 while those ones from the foreign markets were $100,107,000,000. This could probably be because international markets are much younger than the US market so the firm is yet to see the full potential first international expansion strategy. Also, Walmart has focused its growth strategies on emerging markets like China and Mexico because other mature retail markets would not produce as many returns as the emerging markets.
Sonia, R. (2006). Study: Walmart private brands are catching on. Brandweek, Web.
Walmart (2010). Walmart Annual report. Web.